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Strategies & Market Trends : Asia Forum
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To: tom who wrote (2206)2/17/1998 9:20:00 AM
From: Worswick  Read Replies (1) of 9980
 
+Tom thanks so much for your thoughtful post "on the ground". Nothing like reality to wake you up vs. the TV steady-cam view that we get on TV here and in the presss. So, again, thanks for your view from the trenches.

Please don't think me peckish but I do think the scenario in Asia is deflationary not inflationary. If you reference in your mind our "Great Depresion" what happened was that basically no one wanted to spend money. The banks weren't lending it: people hoarded money so they wouldn't be destitute. At that point the whole economic system froze up.

If I may quote you:

"(in Indonesia there is)....huge foreign debt which the country cannot possibly service let alone repay (hence the debt moratorium) ie. the country is bankrupt

- Banks are not lending domestically so the economy has essentially stopped for the last 6 months. Even exporters cannot get credit for working capital ie there is no liquidity to keep the bankrupt companies afloat"

My point is that governments create hyper-inflation by turning on the printing presses.

However, how do people get this money? I would think that people had to have work to get money... unless the government simply were to hand out money on the street corner. In a deflation there is no work because no one is buying anything: the economy has imploded (note yor post):and, banks aren't lending businesses any money to create work for workers. Money, the glue that creates commerce, has ceased to circulate. Game over.

Not too many people understand deflation. There are very few books on it.

Your insights on the disentegration of the social fabric of Indonesia suggest something that I suspected but had not heard. Again, thanks.

IMHO once the enormity of this problem begins to be understood there will be something like the Marshall Plan undertaken in Asia that is a supra reliquification of the banking sector; it will be multi-national effort. It (the Asian crisis) will force the world into a new paradigm of "cooperation" and transparency because "investors" will baulk at anything less.

This is the rosy view. I'll leave the gloomy view unsaid.

Stitch your post was great.

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